Macquarie lifts its mortgage rates, and the question now is if the major banks will follow

Macquarie has increased rates on its Basic Home Loan to 4.05% from 3.99%.

The banks have been tightening lending.

Macquarie increased its home loan rates by 6 basis points, joining other banks as the cost of funds increases and the banks tighten lending.

Owner-occupier loans rise by 0.06 of a percentage point and investment loans by 10 basis points.

Macquarie’s Basic Home Loan goes to 4.05% from 3.99%

The next move is with the big four — CBA, Westpac, ANZ and NAB — to make an out of sequence lift in rates. The Reserve Bank of Australia is still holding cash rate at a record low of 1.5%. It’s been unchanged since August 2016.

AMP, Suncorp and the Bank of Queensland have already lifted their rates.

But the smaller banks are more susceptible to a rapid increase in funding costs because they are more reliant on wholesale funding than the big four.

“This has already forced a number of players including BOQ, AMP Bank, Auswide and IMB Bank to increase mortgage rates and may force smaller lenders to manage growth,” says UBS in a note to clients.

The major banks still have an 80% share of the housing market.

The banks have been tightening lending with the prudential regulator focusing on sound lending practices.

“And the Royal Commission addressing the question of responsible Lending, the banks have continued to tighten mortgage underwriting standards in recent months,” says UBS.

“When combined with the reputational damage they have suffered during this time, the Major Banks have seen their housing credit growth slow sharply.”

The royal commission is creating uncertainty around new rules and legislative change expected after the inquiry reports into misconduct in banking, according to the 2018 Deloitte Mortgage Report roundtable of lenders.

Changes around conduct and consumer interest may take longer to work their way into any regulatory changes but will inevitably lead to slower market growth for lending, Australia’s leading lenders and mortgage brokers told Deloitte.